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Chapter 13 bankruptcy plans are between 36 and 60 months. Several situations may arise over three to five years that could require you to modify your Chapter 13 plan. Our Massachusetts bankruptcy attorney works with you to petition the court to obtain the necessary changes.
What Life Changes Could Require Modifying a Chapter 13 Bankruptcy Plan?
It is impossible to predict what will happen in your life while you are in a Chapter 13 bankruptcy case. Situations and events that could require a bankruptcy plan modification include:
- Significant changes in your pay
- Divorce or separation
- Birth of a child
- Major illness or injury
- Need for another vehicle
- Selling and/or purchasing a home
- Death of a spouse
- Substantial increase in necessary living expenses
You must file a motion with the bankruptcy court to modify your Chapter 13 plan. The motion and amended plan must be served on the Chapter 13 trustee, creditors, and all other interested parties.
Any interested party may object to your motion. If so, your attorney will attempt to resolve the objection if possible. If not, the court holds a hearing for the judge to decide whether to allow the medication.
Things to Consider When Modifying a Chapter 13 Bankruptcy Plan
Before you modify your Chapter 13 plan, things we will discuss and consider include:
The New Chapter 13 Payment
Increasing a Chapter 13 payment could make it more difficult to complete your plan. You must carefully review your budget to make a realistic decision about whether you can afford to increase the plan payment.
Surrender Property
If your plan payment was sufficient to pay off required debts, you might be unable to reduce the plan payments without losing property. For example, if you were paying your car loan in full through the plan, reducing the payment may mean giving up the car. Your attorney may be able to reduce the percentage paid to unsecured creditors to avoid the problem, but it depends on the unique factors of your case.
Converting to a Chapter 7 Bankruptcy
If your income and/or necessary expenses significantly change, you might qualify for a Chapter 7 bankruptcy case. Your attorney reviews your current finances to determine if this is possible. If so, you must consider how converting could impact issues such as non-exempt assets, transfers, past-due mortgage payments, and your car loan.
A Chapter 13 Hardship Discharge
You might qualify for a Chapter 13 hardship discharge. You must prove to the bankruptcy court that your change in circumstances is permanent and will prevent you from completing the Chapter 13 plan.
You must also meet the “best interests of the creditors” test. You must prove to the court that you have paid your unsecured creditors at least as much as they would have received in a Chapter 7 bankruptcy. If you have non-exempt equity in assets, you probably will not pass the test. It depends on the amount of equity and how that would likely be handled in a Chapter 7 case.
A hardship discharge does not eliminate some debts, such as past-due payments to secured creditors, priority creditors (i.e., taxes, alimony, child support, etc.), and student loans. Therefore, you will owe these creditors even if you receive a Chapter 13 hardship discharge.
Schedule a Free Consultation With Our Massachusetts Bankruptcy Attorneys
There are benefits and drawbacks to modifying a Chapter 13 bankruptcy plan. If you have questions about a Chapter 13 plan modification, we are here to help. Call Logan A. Weinkauf, PC, to schedule a free consultation with an experienced Massachusetts bankruptcy attorney.